“I was frustrated to see that even with my Master’s degree, it wasn’t possible for me to find a decent job, and that made me hate the county I am living in,” Kefi Ghazi explained. Despite graduating from the top of his class, he had spent three years looking for a job in his hometown of Tunis, Tunisia.
He was not alone in his frustration. Over 42% of young Tunisians are unemployed (Tunisian National Institute of Statistics, 2014), and across the Middle East & North Africa (MENA), more than one in four youth is locked out of the labor market. For women in the region, the statistics are especially sobering: less than one in five are currently employed (OECD, 2013).
According to a recent study by Beyt.com, the Middle East’s leading career site, 79% of Millennials in the Middle East say that the foremost challenge of their generation is finding a job.
As these young people can attest, the obstacles to youth employment in MENA are very real. But it is the opportunities for youth employment that motivated me to foundEducation For Employment (EFE) as a network of demand-driven job training and placement organizations. From decades of launching successful businesses in a wide range of industries, I knew first-hand that access to skilled talent is crucial to economic success — whether at the company or country level.
With global headlines relating conflict and discord in the region, some doubt whether meaningful job growth could occur there in the near-term. Focusing on only a small slice of a much larger region, the global media tends to ignore some of the changes that — with the right support from local and international actors — could transform the future employment outlook for the region’s youth.
In “Challenges and Opportunities for Youth Employment in MENA,” a recent report funded by The Citi Foundation, EFE found that a number of industries are well-positioned to generate significant entry level job opportunities, and stand to benefit tremendously from the energy and creativity that younger workers contribute.
For example the MENA region’s improved legal and regulatory system, better broadband infrastructure and a rapid uptick in digital adoption have made information and communication technology (ICT) one of the most promising fields for job creation in the near-term. If the current pace of industry growth continues, it could generate nearly 4.4 million jobs over the next five years (Strategy&, 2012).
Along with burgeoning high-speed Internet connectivity, MENA boasts a relatively large population of youth with basic English or French skills, making it a promising location for IT and Business Process outsourcing. Growing international interest in “impact sourcing,” which brings digitally-enabled jobs to disadvantaged communities, could catalyze opportunities in this area. Already, large international companies such as Accenture and Vistaprint have found that through partnering with EFE and similar organizations, they are able to source entry-level employees with globally competitive cost and work quality profiles, and simultaneously create a positive social impact in communities with particularly high unemployment.
Women stand to become the most significant beneficiaries of such growth, as ICT is one of the top sectors employing women in MENA. Online work platforms such as Nabbesh.com have emerged, providing flexibility to workers with family commitments and enabling women to work from home where cultural sensitivities might otherwise prevent them from participating in the labor force.
Recent modernization in MENA’s retail industry, particularly in tourism hotspots, has also led to significant and consistent growth despite political unrest and the global recession. The sector is uniquely positioned to offer employment opportunities to a wide range of young workers, given the diverse options that it provides such as supply and distribution, inventory systems management, finance, and sales.
What’s more, tech-savvy Arab youth are driving growth in e-commerce, and are staffing the field’s expansion. According to PayFort’s State of Payments Report 2014, e-commerce payments in the Arab world are growing faster than anywhere else on Earth, at an annual growth rate of 45. Traditional education institutions have been unable to produce sufficient numbers of entry-level employees with the right e-commerce skills, and regional industry giants such as Souq.com are scrambling to onboard talent. Non-traditional education providers have stepped in to fill the gap. For example, recently, over 40% of Souq.com Egypt employees were EFE graduates.
As “Challenges and Opportunities for Youth Employment in MENA” points out, the potential for significant job creation extends beyond retail and technology into such diverse fields as agriculture, automotive, health and tourism.
While these industries offer promising platforms for job creation, such growth is far from assured. The scale of the Arab youth unemployment challenge eclipses the independent activities of any one set of actors; hence concerted efforts are required at the local, regional and international levels, and across the public and private sectors.
The World Economic Forum provides an ideal platform for turning such multi-stakeholder talk to action. Collectively, we need to prioritize youth employment in the MENA region as both a social and economic imperative, and recognize its momentous power: to throw the region into discord, or to elevate it to new levels of dynamism.
- RON BRUDER, WORLD ECONOMIC FORUM
- Published: JAN. 22, 2015, 11:29 AM
- Source Business Insider
The political stability of the Arab world needs a long-term plan to increase economic stability and move away from dependence on oil as the major economic driver, while also addressing the region’s dangerously high unemployment, particularly among young people.
The proposed Arab Stabilisation Plan, ASP, would build a regional framework to promote infrastructure investment and create jobs. Taking its inspiration from the US-led Marshal Plan to rebuild post-war Europe, it would prioritise infrastructure projects on a national level and boost economic growth in countries such as Egypt, Jordan, Yemen, and Tunisia.
It would be important that the investment would come mainly from within the Arab world such as the Gulf countries, and the private sector, and not rely on external sources which lack the long-term will and commitment to make this work.
Speaking at the “Arab World Context” session on the first morning of the Annual Meeting in Davos, Majid Jaafar CEO of Crescent Petroleum made a strong case for the urgency of a long-term plan which is also large enough to make a serious difference. Other speakers included Salam Fayyad, former Prime Minister of Palestine, and Khalid Abdullah Janahi of Vision 3.
“We need quick and urgent economic action to address the issue of high youth unemployment in the Middle East and North Africa. Insufficient economic growth in the region has led to massive youth unemployment, in some areas more than 60 per cent. This is turning into a demographic time-bomb,” Jafar said.
“The recent fall in the oil price is also a warning that the region cannot be over-reliant on energy resources for GDP growth. We must create long-term sustainable economic growth. Employing our youth is the key to unlocking our true natural resource. We cannot achieve political stability without economic stability,” he added.
“In many cases the region has failed to build national identities let alone a regional one. It has failed to build inclusive and stable institutions, and above all failed to build private-sector driven competitive economies. There is plenty of capital in the region, but it needs a focused multinational effort to create regional trust and direct it into long-term infrastructure investments. This will create employment and sustain economic competitiveness,” Jafar concluded.
Jafar’s comments on the urgency of tackling youth unemployment are backed up by the World Economic Forum’s 2014 Outlook on the Global Agenda, which cites persistent youth unemployment as the number one challenge for the region in the year to come, ahead of managing political transitions and societal tensions.
It comments that “high levels of youth unemployment and a mismatch between education and the skills required by employers have led to a vicious circle, where economies stagnate and there is an over-reliance on extracted commodities”.
The need for a coordinated economic plan to offer hope and enhance stability for the entire region is clear.
In the rocky aftermath of the Arab Spring, leaders across the Middle East have called for a regional “Marshall Plan”.
Most recently, Egypt’s finance minister and Tunisia’s former prime minister both asked for such a plan to mobilise massive resources to unlock the enormous potential for economic growth in promising sectors, such as tourism, energy, transportation and manufacturing, and to meet the urgent demand for jobs and better living standards from rapidly growing populations.
Given the dramatic events now unfolding in Iraq, the need for a coordinated economic plan to offer hope and enhance stability for the entire region is clear.
A recent study by the International Labor Organization (ILO) found that not only does the Middle East have the highest youth unemployment rate in the world, but it also experienced the greatest increase in unemployed youth over the past year.
To address this sharp increase in unemployment and bring it down to an 8pc level, it is estimated the region needs upwards of 6-7pc economic growth versus the near 3pc rates forecast for 2014.
The Marshall Plan was an instrument to transfer large amounts of finance to economies ruined by the Second World War but with essentially healthy institutions and a skilled workforce.
However, what the post-Arab Spring nations also need is transformational finance that targets fundamental reform of the institutional environment and helps raise the skill levels of the population.
For resource mobilisation to be successful, private companies must play a central role, but the aftermath of the Arab Spring has actually depressed private-sector investment in much of the region. If anything, the already-poor investment climate has further deteriorated, with increased macroeconomic uncertainty, political instability and security challenges.
At the same time, investment needs are even greater today than they were three years ago.
Infrastructure investment is critical. The World Bank estimates that the region requires $100bn (£60bn) annually, in sectors such as transport, telecoms and energy. Infrastructure still accounts for only 5pc of expenditure in the region (compared with 15pc in China).
Direct investment into critical infrastructure projects and partnering with the private sector would limit the bureaucracy often associated with large government projects and enable quicker and tangible economic improvements in countries such as Jordan, Yemen, Egypt and across North Africa.
Each $1bn invested in infrastructure could create up to 100,000 new jobs according to World Bank figures.
A large-scale “top-down” infrastructure effort must be complemented with a “bottom-up” approach focused on education, skills training and SME development. All elements are necessary to underpin a dynamic and sustainable economy.
The most effective way to create jobs is to spur the growth of new companies and allow small and medium-sized companies to grow into larger companies. Investments would need to be project-based and held to best practice in governance, while encouraging much-needed reforms in the investment climate and regulatory environment.
In a joint report on the competitiveness of the Arab countries, the European Bank for Reconstruction and Development (EBRD) and the World Economic Forum recently called for urgent institutional reform to support private-sector growth, arguing that excessive red tape and ineffective enforcement of competition policy and governance rules were hampering entrepreneurship. A private sector-led approach would enhance regulatory reform in this respect.
Private-sector principles are also important in expanding infrastructure investments. Lack of transparency and accountability is undermining efficiency and quality of service throughout the economy. Boundaries between central and local governments, and between local governments and utilities, are unclear.
In order to meet the needs of increasing populations, with legitimate demands for safe drinking water, more reliable power supplies and better transport, management of these services must improve.
Ultimately, private investors should also be attracted into municipal infrastructure, but only once these deficiencies in the investment framework have been addressed.
Additional resources must not be used to further distort the economies by subsidising wasteful use of energy and food consumption. Reducing subsidies is of the highest priority in improving the fiscal situation and encouraging better resource management.
But as policymakers are only too aware, subsidy reform must be handled with the utmost care. These countries have substantial pockets of deep poverty, where energy and food are important items in household budgets. The most vulnerable must be protected through carefully targeted interventions.
An Arab-led coordinated regional investment plan could promote much-needed economic growth and encourage improvements in the region’s business environment.
With additional income from sustained high oil prices, the Gulf co-operation council states are well placed to play a leading role as investor countries. They have already generously provided emergency finance, especially to Egypt. It is vital that the recipient countries use this efficiently while properly addressing the underlying structural problems of their economies.
Just as in the case of the Marshall Plan, for which the World Bank was once created, a multilateral framework is needed to ensure funds are managed, invested and governed through a transparent and coordinated mechanism, building upon global best practice.
Through a common regional investment platform, participating countries will be able to benefit through enhanced regional economic development, stability and security.
Majid Jafar is CEO of Crescent Petroleum and founder of the Arab Stabilisation Plan
Erik Berglof is chief economist for the European Bank for Reconstruction and Development
The threat to stability in the Arab world posed by youth unemployment is such that governments old and new must urgently address the worsening economic environment. If a solution is not found soon, the whole region risks instability or even secondary revolutions.
The FT’s beyondbrics touched on this issue recently in an article about moves towards a higher minimum wage in Saudi Arabia, arguing that job creation is “imperative” for “a country that is throwing money at its potentially restive population”. This is an important point. With commentary on the region mostly focusing on the struggle for freedom and political change, it is often forgotten that the issue that was at the core of these revolutions was the chronic and widening deficit of economic opportunity, combined with the demographic time-bomb of a rapidly growing youth population.
And this is not just an issue for those looking to avoid potential unrest. Arab nations in transition must also address the economic crisis. Expectations are high but just because regimes have toppled does not necessarily mean that jobs and housing will become immediately available.
Egypt, the most populous Arab country, is an important example. The euphoria of Cairo’s Tahrir Square has long died down and, despite burgeoning democratic development and a newly elected government, the country faces immense challenges on the domestic front. While there have been slight improvements in recent months, public security has generally deteriorated since the revolution, with a rise in killings, abductions and theft, in addition to the riots that were so widely reported earlier this year.
At the same time, the economy continues to worsen. More than 40 per cent of Egyptians live below the poverty line and the critical tourism and construction sectors have ground to a halt, causing a liquidity crisis. Fuel shortages are also an increasingly urgent issue.
The fact is that 700,000 jobs per year must be created in Egypt, just to keep unemployment from rising. That pace of growth is just unrealistic. The World Bank expects Egypt’s growth rate per year to be 1 per cent or less, and foreign direct investment has plummeted. In its June draft budget, Egypt’s government projected that its deficit will increase to nearly 11 per cent of GDP.
Egypt’s long-term prospects could be very positive, but without action to stabilise the short to medium-term jobs crisis, the country may never achieve that potential. The IMF recently agreed to a $3bn standby loan to help the country bridge its deficit for fiscal year 2011-2012, but this is only the tip of the iceberg.
So what’s the answer?
Government leadership is, of course, essential. Labor market reform, as we are seeing in Saudi Arabia, is certainly one way of defusing the “region’s social time-bomb”, as is tackling corruption and improving education.
The private sector also has a crucial role to play. Investment in infrastructure projects, such as construction of highways and bridges, and large rural or agricultural projects, could provide attractive returns and create jobs speedily. The private sector could implement them, but the funding needs to be provided. The GCC is probably best placed in this respect, given that gulf companies are already major investors in Egypt and don’t face the same mistrust as western firms.
Egypt is not the only Arab nation facing these issues. Before the so called “Arab Spring”, regional youth unemployment stood at 24 per cent and the stark reality is that 100m jobs need to be created in the Arab world in the next two decades alone, more than was created in the whole of the last century. Tackling unemployment is by no means a panacea but, for those playing a part in the transition of the region the lessons are clear: it is not wise to separate political rights from economic rights.
How to get more of the world’s savings to pay for new roads, airports and electricity
IF YOU have been to New York’s La Guardia airport recently, taken a train during London’s rush hour, tried to drive in Lagos or endured one of India’s ubiquitous power cuts, you will have first-hand knowledge of the world’s infrastructure deficit. According to the World Economic Forum, global spending on basic infrastructure—transport, power, water and communications—currently amounts to $2.7 trillion a year when it ought to be $3.7 trillion. The gap is almost as big as South Korea’s GDP. And it is likely to grow fast.
Much of the money to plug the gap needs to come from the public purse: even in an age of austerity many governments should be spending more. With the economy weak and borrowing cheap, it is daft that America’s public infrastructure spending is at a 20-year low, even as the country’s roads, bridges and dams are rated D+ by the American Society of Civil Engineers. The most cash-strapped emerging economies have room to cut inefficient subsidies (such as for fuel) and switch the money into building better roads and sewers.
But public money can be only part of the solution. The greater opportunity lies in tapping private capital. Unfortunately, the big global banks which used to lend money to finance infrastructure projects are pulling back, as new “Basel 3” capital rules make such lending less attractive (see article). The potential pot of gold is elsewhere, in the $50 trillion of capital managed by pension funds, sovereign-wealth funds, insurance companies and other institutional investors. Only 0.8% of this is currently allocated to infrastructure. A tenfold increase would be a good target.
From pension funds to power stations
In principle, investing in a power station or toll road ought to be an attractive prospect for institutional investors. The long life of these assets is a perfect match for the long-term liabilities of a pension fund. Infrastructure projects offer reliable cashflow, a hedge against inflation, low volatility and returns that are generally not correlated with other assets. In practice, though, many money managers have shied away, scared by the scale, complexity and political risk involved. Individual pension funds lack the expertise to assess complicated projects, too many of which are dreamt up by politicians who care more about winning votes than commercial viability. Corruption is rife and political pitfalls, from angry environmentalists to voters furious about rising power prices, are legion. In emerging economies these dangers are magnified by the possibility of currency crises.
But in two areas a few innovations could transform the market. The first is the professionalisation of project management. Every country needs a competent group of bureaucrats who have the authority and skills to design a pipeline of viable infrastructure deals and the political clout to standardise procurement procedures and other practicalities of getting a road built or a tunnel dug. Some countries already do this well. Chile has a National Public Investment System that has dramatically improved the efficiency of its capital spending. Canada and Australia stand out too. But in too many countries technocrats tend to be under the thumb of politicians and not up to the job. In poorer countries aid money could usefully be used to pay for top-notch infrastructure teams.
The second priority is to streamline the system for slicing risk unrelated to a project’s commercial viability. Governments and international financial institutions like the World Bank already, for a fee, protect private investors against political risks, such as the expropriation of their assets. Rich-world development agencies also offer guarantees for projects their countries’ firms invest in. But the system is small, fragmented and geared to banks. To encourage the growth of a market in infrastructure bonds, the big development organisations, led by the World Bank, ought to provide a bigger and more standardised menu of credit enhancements and guarantees.
These changes could have dramatic results. Infrastructure bonds could become as ubiquitous as mortgage-backed securities. That won’t mean every African country gets the road network it needs. But it would help ensure that more of today’s savings finance the building blocks of tomorrow’s growth.